Peer to peer lending startup, Prosper, is expanding operations to Japan and other Asian countries as a shared partnership with Tokyo-based SBI Holdings, Inc. SBI will be helping prosper navigate Asia’s regulatory environment. SBI Group has a market capitalization in excess of $8 billion and consists of 65 consolidated subsidiaries and 12 affiliated companies, including 9 public companies.
Prosper handles loans of up to $25,000 (the average funded loan is $5,000), broken into smaller loans to distribute risk. Money for the loan is then supplied by Prosper lenders bidding for the most attractive interest rates. Prosper earns revenue by taking 1% of the loan amount in fees from the borrower up front, and charging a 0.5% yearly loan maintenance fee to lenders. Prosper currently has over $79 million in funded loans and more than 380,000 members. So far it appears a lot of those members are logging on to pay off credit card debt at a lower rate. Prosper’s backer, Benchmark, has also invested in another P2P lender, Zopa.
It’s ironic to see these peer to peer lending startups expanding at the same moment the collapse of the sub prime lending market sends waves through the mortgage market. Similarly, these startups will be sink or swim based on their ability to effectively manage risk.
Prosper is managing risk by encouraging transparency, automatically deducting monthly loan payments, and tracking reputations. Borrowing groups are another risk management tool, both helping first time borrowers get some initial credibility (and lower rates) while encouraging the network to police itself by tying together their reputations.
So can Americans now borrow money from the Japanese?
That would be an interesting angle.
“You Too Can Contribute to America’s Current Account Deficit”, heh.
Interesting to see SBI getting involved in the peer-to-peer loan business in light of the fact that they have substantial holdings in the B2C consumer finance sector. Prosper aims to go head to head against some of the biggest consumer loan companies in Japan (Aiful, AIC, CFJ etc). A good percentage of SBI revenue comes from direct commissions from these companies. How it plans to build a P2P loan channel without alienating it’s current loan business remains to be seen.
……is is because of the current credit crunch that companies such as Prosper will “prosper”.
Also inadvertently you article points out something very disturbing. The fact that Benchmark Capital has invested in both Prosper and Zopa is troubling.
I’m no lawyer, but, I did stay at a Holiday Inn Express last night:) When I was 18 years old and took business law this was referred as “conflict of interest”. That said I looked at Zopa’s website to see if at least they were servicing accounts in another geography – which they were (Prosper=USA; Zopa=UK) HOWEVER, At the very top of the Zopa homepage it says “Coming to America soon”!
Something does not smell right, eh?
I am not sure if p2p will work in Asia, but here in the US it appears to be pretty strong. Why? Because Americans want to spend like there is no tomorrow. Bigger cars, bigger houses, etc. You have companies like Lending Club who are doing this just inside of facebook! Want an iphone? don’t worry about saving for it – just get a p2p loan!
Here is my 3 part series on social p2p lending.
http://www.cent...lending-web-2-0
Alex, Zopa is indeed coming to the U.S., and I wonder if Prosper’s expansion to Asia is a move to widen their own market. Depending on which parts of Asia they’re focusing on, they may be competing with PPdai, a social lending service that launched last month in China.
It’s possible SBI plans on having whichever is more successful, Zopa or Prosper, acquire the other. Then they’d have a company operating in the U.K., the U.S., and Asia. Depending on how successful it is, maybe they’ll also acquire Smava(Germany) and Boober(Netherlands)? Or, being that big, they might feel confident enough to start their own local services and simply compete.
I did a round-up and commentary on social lending a little while ago. If you’re interested, it’s called, Small Loans, Big Bucks: The World of Social Lending.
Alison — from what I’ve read Asian spending is quickly ramping up. I think desire for “stuff” is not just an American thang! We spend because we can and want too (and by “can” I don’t mean “afford”).
*a move to widen their own market, in response.
Hey Nick, is this stuff in the same space as Lending Club? Interesting write-up – who should I throw some money into as an investor.
David,
This is the same space as Lending Club. If you are interested in investing I’d recommend doing a fair amount of research first. There are lessons that some of the first Prosper lenders learned that you don’t need to learn again with your own money. I write a blog for Prosper lenders (and I also cover other P2P news.) I’d recommend these two articles to start and then browse the Prosper forums.
How does Prosper compare to other investments?
Prosper: A hands on education in risk management
Good luck!
I wonder if this means current lenders will be-able to lend in foreign markets
RE: “It’s ironic to see these peer to peer lending startups expanding at the same moment .. ”
I would suggest that during credit crunch time is the ideal moment for social lenders to expand, and lever their diversified leners’ broader view of consumer risk, while not having hands tied due to artificial liquidity contraction that traditional bankers will in fact experience, at least in the US.
With regards to the types of lending on P2P sites, you may wish to quickly read this article on SocialLendingWatch which is an interview with a Prosper lender who has actually published a “how-to”book based on his experiences: http://www.soci...ouve-never-met/
Maneo is not the first p2p lending site in Japan:
http://prosperl...2p-lending.html
I meant to say, Maneo is “now” the first p2p lending site in Japan.
http://prosperl...2p-lending.html